India’s empire builder

Saturday, December 29, 2007

After celebrating his 70th birthday yesterday, Ratan Tata would in the normal course of affairs be facing mandatory retirement from the Tata Group. Two years ago, however, India’s most respected and acquisitive conglomerate ex-tended to 75 the age until which non-executive directors could serve, giving the man who has transformed it over the past 16 years a new lease at its helm. Although corporate governance purists at the time criticised the change as retrograde, it is a decision that few investors now regret.

Mr Tata will be one of the most visible faces of the new India in 2008. He was yesterday waiting to hear whether Tata Motors, a truckmaker that has diversified into passenger cars, had been successful in its offer for Jaguar and Land Rover, luxury brands put up for sale by Ford. In the wake of this year’s audacious $13bn (?6.5bn) purchase of Corus by Tata Steel, the Indian company’s bid for these two prestige marques has again highlighted the risk-taking verve of one of India’s most ambitious corporate empire builders.

The news will come as Mr Tata prepares to unveil the most keenly awaited car ever to roll off an Indian assembly line. Tata’s small car, which the Cornell-trained architect helped design, is slated to appear at the Delhi Auto Show on January 10. It will sell for Rs100,000 (?1,275) – a rupee figure known in India as one lakh – and bring motoring to a mass market. With a new plant in West Bengal able to make 250,000 a year, the “one-lakh car” will more than double Tata’s car capacity. “Mr Tata encourages us to take big, calculated risks,” says Ravi Kant, Tata Motors’ managing director.

In 1991, when he succeeded his uncle, J.R.D. Tata, a man who was to India what Fiat’s Giovanni Agnelli was to postwar Italy, few expected the group to survive the onslaught of liberalisation. It earned most of its money in stodgy domestic industries dependent on the centrally planned “licence raj”. The government told companies how much they could produce and protected them from foreign competitors. The family held only small stakes in many of the 300-odd group companies. Powerful barons ran the main businesses as rival fiefs.

Mr Tata was forced to earn rather than command respect. A shy man, he rarely features in the society glossies, drives himself to work in a Tata car and has lived for years in a book-crammed, dog-filled bachelor flat in Mumbai’s Colaba district. His gentle, kind manner engenders loyalty. Tata remains unfocused – he is arguably the glue that binds a sprawling assortment of stakes in 98 companies – but it is professionally man-aged and globally competitive: more than 60 per cent of its forecast $50bn sales this year are overseas.

Some have reservations about his bid for Jaguar and Land Rover and the one-lakh car. Although Tata’s offer for the British brands has received an endorsement from union shop stewards in the UK, some analysts worry about the strategic logic. Dealers in the US have warned of “image” issues. “My concern is perception and perception is reality,” Ken Gorin, chairman of the Jaguar Business Operations Council, told a US newspaper. “I don’t believe the US public is ready for ownership out of India for a luxury car brand such as Jaguar.”

While the one-lakh car will help Tata Motors to renew an ageing passenger car product line, many fear it will be a mixed blessing for India. At a time when the country’s infrastructure can barely cope with existing traffic, a new era of mass motoring will bring with it worsening urban congestion and pollution. Mr Tata stresses the benefits of safer transport for tens of thousands of families that currently move around on single motorbikes.

Osamu Suzuki, chairman of Suzuki Motor, which owns Maruti Suzuki, India’s largest passenger carmaker, recently said that anyone selling a car that cheaply would have to scrimp on safety and emission standards, compromising their responsibilities as a manufacturer. Mr Tata disagrees. “We’re producing a car that will be no more polluting than a motorcycle,” he says. “As we’re not going to produce millions and millions of them, inundating the country, we will not be adding to the carbon footprint on a per-passenger basis.”